FHA Announces Increased Forty-Year Term for Loan Modifications

On Wednesday, March 8, 2023, the Federal Housing Administration (FHA) announced its final rule to increase the term of a loan modification to 480 months (40 years).

The rule permits lenders to provide an extended modification to borrowers after a default episode to assist in avoiding foreclosures. The ability to modify distressed loans extends the outstanding balance for borrowers over time, lowering the monthly payment to help avoid foreclosure. This also aligns FHA’s requirements with loan modifications available to lenders for borrowers with mortgages backed by Fannie Mae and Freddie Mac.

Read NAR’s letter of support for a 40-year loan modification.

Read FHA's final rule.